President Donald Trump’s plan to bail out and effectively nationalize Spirit Airlines could be facilitated by a 1950 law passed to secure national defense during the Korean War.
According to CBS News, “The Trump administration is exploring using the Defense Production Act as part of a strategy to save the beleaguered Spirit Airlines, according to U.S. officials familiar with the discussions … Spirit has declared bankruptcy twice in the past two years, after the Department of Justice blocked a merger with JetBlue during the Biden administration. The Iran war has been driving up jet fuel costs for all airlines and earlier this month, creditors expressed serious doubts Spirit could remain viable.”
Generally, the Defense Production Act is used in a wartime emergency to compel private businesses to give priority to federal government contracts, as a means of ensuring critical supplies do not see shortages.
However, Trump has shown a willingness to use emergency powers for non-emergency purposes repeatedly.
Other statutes he has invoked are the National Emergencies Act, to fund construction of his border wall, and the International Emergency Economic Powers Act, which he used to authorize tariffs with almost every country on the planet until the Supreme Court intervened.
This comes as the general terms of the planned bailout are taking shape, CBS reported.
“The government would lend Spirit $500 million at a reasonable rate interest, and become the top debtor in the bankruptcy pecking order. The loan would be protected by Spirit assets that would exceed the government’s costs, and would provide taxpayers with a warrant — the right to own 90% of the company after it emerges from bankruptcy,” said the report. “The Pentagon would use Spirit’s excess capacity for transporting troops, military cargo or other missions, sources told CBS News. The airline would then likely be sold to another carrier.”
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